ECO 316 Complete Course

Week 1

ECO 316 Week 1 Quiz

Discussion Questions

What are the implications of a U.S. policy to bail out firms and heavily subsidize the economy? How could such a policy create inflation and higher interest rates? If you have cash available should you wait until interest rates rise?

Treasury Inflation Protection Bonds From Chapter 6, read the case on pages 126-127 (Japan Inflation-Linked Bonds).

Week 2

ECO 316 Week 2 Quiz

Discussion Questions

My company just came out with a new product? Should I buy a bunch of company stock and get rich? What are the pros and cons of such an investment?

From Chapter 12, complete problem 13 (page 276): Describe how mutual funds provide services related to risk sharing and liquidity. Distinguish a mutual fund from a bank. What do the differences you highlighted imply about the need for regulation of mutual funds as opposed to banks?

Week 3

ECO 316 Week 3 Quiz

Discussion Questions

From Chapter 16, complete problem 13 (page 382): Relate the problem of exchange rate risk in international banking to interest rate risk in domestic banking. On the basis of your understanding of interest rate risk, suggest strategies for managing exchange rate risk in international banking.

From Chapter 15, complete problem 19 (page 363): Suppose that you manage a small S&L that has a net worth of $50 million. You fear that within two years, regulators will discover that your firm is insolvent and will shut you down. You have two possible investment strategies: (a) continue to operate as you have been, offering market interest rates on CDs to finance mortgage loans, or (b) offer higher than market interest rates on CDs and use the increased funds to speculate in junk bonds and real estate. Your analysis tells you that strategy (a) has a 10% chance of losing $10 million and a 90% chance of gaining $20 million, with an expected return of $17 million. Strategy (b) has an 80% chance of losing $50 million and a 20% chance of gaining $75 million, with an expected return of $25 million. What strategy should you follow? Why? What are the consequences of your choice? What should a regulator do in this situation? How might your behavior change if you expect a government bail out?

Week 4

ECO 316 Week 4 Quiz

Discussion Questions

From Chapter 19, complete problem 12 (page 454): Evaluate: The Federal Reserve System is independent of the political process in the United States.

From Chapter 21 complete problem 14 (page 501): If the Fed wants to decrease the value of the dollar on foreign-exchange markets, what should it do? What should it do if it wants to increase the foreign-exchange value of the dollar?

Week 5

ECO 316 Week 5 Final Paper

Discussion Questions

From Chapter 26, complete problem 14 (page 632): Suppose that you observed a substantial decline in the money growth rate six months before the start of every recession. Would that be enough to convince you that money affects output? Why or why not?

From Chapter 27, complete problem 15 (page 653): You have been assigned to determine whether the economy is experiencing a credit crunch. What patterns in movements in the federal funds rate, the volume of bank lending, and the volume of short-term lending in financial markets will you look for? Why?